Rents need to drop by as much as 15%, major developer says

Apartment rents in cities such as New York and San Francisco will need to fall as much as 15% for a glut of high-end developments to be absorbed, according to billionaire real estate investor Richard LeFrak.

"We built a lot of new product at the high end, anticipating incomes that don't exist in the market now," LeFrak, chairman and chief executive officer of the LeFrak Organization, said Wednesday in a Bloomberg Television interview. "We need more affordable product in the market. There's a huge demand at that price point."

New York landlords are already feeling the pinch as renters take advantage of a flood of new buildings to negotiate concessions and price cuts. Rents fell last month for Manhattan apartments of all sizes, the first across-the-board decline in at least four years, as property owners compromised to keep units from going empty.

Landlords whittled an average of 3.3% off their asking rents in February, compared with 2.5% a year earlier, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. On top of that, concessions such as a free month or payment of broker's fees were offered on 26% of all new leases, the second-highest share in the firms' records.

LeFrak, whose family business is best known for building the eponymous apartment complex in New York's Queens borough, has been tapped by President Donald Trump to help spearhead a committee on infrastructure spending. Details of the administration's plan to rebuild the country's roads, bridges and other public works have been scant.

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